Item 1.01 Entry Into a Material Definitive Agreement.
On
October 1, 2021, the Company and certain institutional and accredited
investors (the “Investors”) and members of the Company’s management team (the “Management Team”)
entered into a securities purchase agreement (the “Securities Purchase Agreement”) pursuant to which the Company
agreed to issue and sell to the Investors 1,240,737 shares (the “Shares”) of its common stock, par value $0.0001 per
share (the “Common Stock”), in a registered direct offering (the " Offering") for aggregate gross proceeds of $4,044,802.62.
The Shares were offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-255096) filed with the
Securities and Exchange Commission (the "Commission") on April 7, 2021, and declared effective on April 16, 2021. The purchase
price for each share in the Offering was $3.26. Steve Shum, the Chief Executive Officer of the Company, and Andrea Goren,
the Chief Financial Officer of the Company, each purchased 30,674 shares in the Offering for gross proceeds of $199,994.48.
The
net proceeds to the Company from the Offering, after deducting Placement Agent fees and the Company’s estimated offering expenses,
are expected to be approximately $3.65 million. The Offering is expected to close on October 5, 2021, subject to the satisfaction of
customary closing conditions. The Company intends to use the net proceeds from the transaction for working capital and general corporate
purposes and up to $500,000 of proceeds to repay current outstanding indebtedness, which indebtedness has a current maturity date of
December 22, 2021 and bears interest at 10% per annum.
The
Securities are registered under the Securities Act of 1933, as amended, on the Company’s Registration Statement on Form S-3 (Registration
No. 333-255096), previously filed with the Securities and Exchange Commission and declared effective on April 16, 2021.
The
representations, warranties and covenants contained in the Securities Purchase Agreement and Stock Purchase Agreement were made solely
for the benefit of the parties thereto. In addition, such representations, warranties and covenants (i) are intended as a way of allocating
the risk between the parties to the Securities Purchase Agreement and not as statements of fact, and (ii) may apply standards of materiality
in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company. Accordingly, the
Securities Purchase Agreement is included with this filing only to provide investors with information regarding the terms of the transactions.
Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Securities
Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures.
In
connection with the Offering, the Company entered into a Placement Agency Agreement with Paulson Investment Company, LLC (the “Placement
Agent”), pursuant to which the Company will pay a cash fee of $323,584.21 to the Placement Agent (eight (8.0%) of gross proceeds
from the Offering). The Company will also reimburse the Placement Agent for expenses incurred by it in connection with the Offering.
In
addition, the Company also agreed to grant to the Placement Agent or
its designees warrants to purchase up to 3% of the aggregate number of shares sold to Investors in the Offering (37,222 shares) at an
exercise price of $3.912 per share (the “Placement Agent Warrants”) (120% of the offering price of the Shares).
The Placement Agent Warrants provide for cashless exercise. The Placement Agent Warrants will be issued in reliance on the exemption
from registration provided by Section 4(a)(2) of the Securities Act and Regulation D thereunder as transactions not involving a public
offering and in reliance on similar exemptions under applicable state laws. The Company will serve as warrant agent for the Placement
Agent Warrants.
The
foregoing description of the PAA, the Securities Purchase Agreement, and the Placement Agent Warrants, are subject to, and qualified
in their entirety by, the documents attached hereto as Exhibits 10.1, 10.2, and 4.1, which are incorporated herein by reference.
Dentons
US LLP, counsel to the Company, delivered an opinion as to legality of the issuance of the shares and warrants in the Offering, a copy
of which is attached hereto as Exhibit 5.1 and is incorporated herein by reference.
This
Current Report on Form 8-K does not constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any sale
of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration
or qualification under the securities laws of any such state or jurisdiction.